Publication

Nevada Court of Appeals Clarifies What Constitutes a Breach of the Peace When Repossessing Vehicles

Jul 06, 2020

By Bob L. Olson

Most jurisdictions, including Nevada, have long-held that a secured creditor may exercise the self-help remedy of involuntary repossession of collateral provided that the repossession does not result in a breach of the peace. See, e.g., NRS 104.6909; Nev. Nat’l Bank v. Huff, 94 Nev. 506, 512, 582 P.2d 364, 369 (1978). Indeed, this is a rule of common law that existed long before states began adopting the Uniform Commercial Code. It was not until Droge v. AAAA Two Star Towing, Inc., 136 Nev. Adv. Op. 33 (Nev. Ct. App. June 18, 2020) (“Droge”), however, that a Nevada appellate court had the opportunity to address “what conduct, undertaken in the course of a self-help repossession of a vehicle, constitutes a breach of the peace, such that the privilege to enter real property without judicial process and retake collateral afforded by NRS 104.9609 no longer applies to those engaged in the repossession effort.” Id. at 2. 

Almost all of the facts in Droge are disputed. Nonetheless, Droge serves as an interesting example of how a repossession can go wrong. The few undisputed facts appear to be that Russell Droge (“Russell”), who was not a party to the case, obtained a loan to purchase a vehicle and stopped making loan payments after he was incarcerated. While Russell was incarcerated, the vehicle was stored on property owned by his parents James Droge (“James”) and Cynthia Droge (“Cynthia”) (the “Plaintiffs”). The secured creditor engaged a third-party to repossess the vehicle who was unable to do so for several months because the vehicle was kept in Plaintiffs’ secured backyard. After several months, the repossession agents saw the vehicle parked in the Plaintiffs’ unfenced driveway and attempted to repossess the vehicle. Then things got interesting.

While the Defendants were trying to repossess the vehicle from the driveway, the Plaintiffs came outside and one of them allegedly told the Defendants to leave their property. James then got the keys to the vehicle, got in it and moved the vehicle. One of the Defendants – Donald Shupp – was under the vehicle when James moved the vehicle. Shupp alleged James backed the vehicle up while he was under it and struck him. The Court summarized Shupp’s statements as “he would have been crushed if James had backed Russell’s truck up another four inches” but for the warning made by another Defendant for him to get out from under the vehicle.  While James admitted that he knew Shupp was on the ground behind the vehicle, he denied that he struck Shupp with the vehicle. Regardless of whether or not Shupp was hit by the vehicle, the sheriff’s deputy who showed up at the Plaintiff’s property arrested James for battery with a deadly weapon. The district attorney then charged James with that crime. James was ultimately acquitted of those charges by the jury.

James and Cynthia then sued everyone associated with the repossession except for the secured creditor who ordered the repossession. They asserted a number of claims for relief including trespass, malicious prosecution, intentional inflection of emotional distress and negligent infliction of emotional distress. 

The Nevada Appellate Court spent approximately thirteen pages discussing what constituted a breach of the peace in self-help repossession cases. When doing so, the Court noted that a breach of the peace has been described as “a legal concept with shifting boundaries not unlike the relatively elastic legal concept of ‘probable cause.’” Id. at 12 (citing Hopkins v. First Union Bank of Savannah, 387 S.E.2d 144, 145 (Ga. Ct. App. 1989)). Thus, most courts do not adopt a definition for “breach of the peace but rather focus on the 'specific factual circumstances of the case'.” Id. The Droge Court took the same approach and declined to define “breach of the peace.” Id. at 13.

The Droge Court then adopted the approach set forth in the Restatement (Second) of Torts, § 198(1) (1965) which provides:

[o]ne is privileged to enter land in the possession of another, and at a reasonable time and in a reasonable manner, for the purpose of removing a chattel to the immediate possession of which the actor is entitled, and which has come upon the land otherwise than with the actor’s consent or by his tortious conduct or contributory negligence.

The Droge Court focused primarily on the Restatement’s two requirements that the repossession must be conducted in a “reasonable time” and in a “reasonable manner.” Id. at 20. The Court then held that although the Plaintiffs did not allege the repossession was not at a reasonable time, there were material issues of fact regarding whether the repossession was attempted in a reasonable manner and remanded the case for further proceedings. Id. at 22-23.

Although the lender was not a party to the suit, the Court opened the door for holding the lender liable by stating in a footnote that “secured parties will be held liable for actions taken on their behalf by agents or independent contractors.” Id. at 3, N. 1.  

It is also interesting to note that the Plaintiffs, who were suing for what could be generally labeled wrongful repossession were not obligated on the loan to the secured creditor and did not own or have an interest in the vehicle. The Defendants alleged that the Plaintiffs should not be allowed to sue for damages in connection with the repossession because NRS 104.9625 limits the remedies for a secured party’s failure to comply with NRS 104.9609 to the debtor (Russell), the obligor (Russell) or the holder of a security interest or other lien on the collateral. The Court rejected this argument, holding that “Nevada’s self-help repossession statute is not an exclusive remedy.” Id. at 25-28. This opens the door for someone other than a borrower or owner of collateral to sue for wrongful repossession.

Self-help repossessions have been described as an “inherently dangerous activity.” Id. at 18 (citing Ford Motor Credit Co. v. Ryan, 939 N.E.2d 891, 927 (Ohio Ct. App. 2010)). Droge demonstrates that self-help repossessions can be both physically and legally dangerous. Since the standards for proving or disproving whether there was a breach of the peace are vague – reasonable in time and manner – and fact intensive, any litigation flowing from an alleged wrongful repossession will likely be very expensive. In order to help avoid those physical and legal dangers, secured lenders can request the court’s assistance in repossessing their collateral by filing either a replevin action or a claim and delivery action. 

 

           

About Snell & Wilmer

Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 16 locations throughout the United States and in Mexico, including Los Angeles, Orange County and San Diego, California; Phoenix and Tucson, Arizona; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.

©2024 Snell & Wilmer L.L.P. All rights reserved. The purpose of this publication is to provide readers with information on current topics of general interest and nothing herein shall be construed to create, offer, or memorialize the existence of an attorney-client relationship. The content should not be considered legal advice or opinion, because it may not apply to the specific facts of a particular matter. As guidance in areas is constantly changing and evolving, you should consider checking for updated guidance, or consult with legal counsel, before making any decisions.
Media Contact

Olivia Nguyen-Quang

Associate Director of Communications
media@swlaw.com 714.427.7490